Sep 19, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


June 2012 Archive for EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

EHedger Afternoon Grain Commentary 6/29/12

Jun 29, 2012

USDA Report

If the outside markets had not been so strong today, this report would likely have sent corn and soybeans lower.  While the initial reaction at 7:30 am sent new crop corn sharply lower, within 10 minutes we traded 22 ¾ cents higher.  The corn acres were 300k above the average analyst estimate and soybeans were 600k above.  Corn’s quarterly stocks were slightly below expectations at 3.148 billion bushels while soybean stocks were slightly above expectations at 667 million bushels.  Wheat ending carryout was 743 million bushels which was 18 million above the average guess.

The early morning forecast was still expecting dry conditions but rains were added to the midday update.  Much needed precipitation has been added for the lower section of the Midwest in the 7-10 day period.

Given that the Dollar Index was sharply lower and crude oil was over $7 higher today, the market saw the initial price drop at 7:30 as another opportunity to get long.  Obviously if we continue to get dry weather patterns for the next couple of weeks they can continue to march this market higher.  At the same time if we add rains to the Sunday night forecast corn and beans can see a sharp turn around lower.  It is still all about the weather but we have to also take into account demand destruction.

We are still at demand destructive price levels for corn which may ultimately lead to price declines.  Analysts are looking at declining corn yield potential but are still forecasting demand at current USDA S&D estimates.  We have to remember that the USDA increased demand from 2011 by a billion bushels of corn. Are we really going to see these increases to feed and exports at $6.35 a bushel?  Feeding margins are poor and US corn is now the most expensive feed grain in the world again.  Ethanol blending margins are much lower and the ethanol plants themselves are starting to shut down (as witnessed over the past few weeks.)  I don’t want to sound overly "bearish" because it is still about weather, but I just want to make the point that it may be hard for the market to sustain these gains without further changes to supply and/or energy prices.

Lastly, I wanted to discuss the changes to the Commitment of Traders report.  For the week ending Tuesday, June 26th, open interest in corn using futures and options dropped by a whopping 131,616 contracts!!!  The managed money liquidated 40,988 shorts as well as 3,161 longs.  The non-reportable trader liquidated 22,029 shorts.  What does this tell us?  That this was a short covering rally where the funds jumped out of the shorts they had on as well as the retail trader and hedger.  The hedger likely moved many of these shorts over to the commercial, as the commercial short position went up.  Soybeans also had a large decrease in open interest but long additions were made to the already massive net long position held by the funds.

For now all eyes will still be on weather for Sunday’s 5pm open.  If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Have a great weekend!

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/26/12

Jun 26, 2012

Corn continued its rally this time closing 15 cents higher in July and 30 cents higher in December. Soybeans did not hold the same strength and closed the day down 12 ¼ cents in the November contract.  Wheat closed 4 ¾ higher.

Weather and declining crop conditions are still the major driving factors for today’s market action.  After the close yesterday corn’s good-excellent rating fell by 7 percent!  We are obviously seeing declining conditions from the dry weather but the midday forecast did offer some additional rains in the forecast for Sunday into Tuesday.  The lower Midwest is also expected to see slight increases to the rain event expected July 3rd – 5th.  No major updates or changes were expected for tropical storm Debbie on the Midday.

So why was corn up 30 while beans had double digit losses?  Many traders are concerned with the difference in crop stages for these weather risks, but a lot of it could be repositioning ahead of the reports on Friday.  We know that the "managed money" is massively long soybeans.  While their position shows them net long corn, it is a significantly smaller position when compared to the beans.  This massive move in the corn/bean ratio over the last couple of days could be as simple as the funds repositioning by purchasing corn and selling beans.  I have indicated this move in the ratio in the chart below.  We are now back to a ratio of 2.26 to 1 which is almost to the 200 day moving average.  We won’t know exactly what the funds have done until we get the next Commitment of Traders report on Friday afternoon.

Chart: November Soybeans – December Corn RatioSoybean Corn Chart

Tomorrow morning we will have the STATS Canada acreage at 7:30 am, as well as ethanol stocks and production at 9:30 am. If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Thanks and have a great week!

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/22/12

Jun 22, 2012

Grains had a large trading range today finishing the session with minor gains.  December corn closed 4 cents higher at $5.54, November soybeans closed 4 ¼ cents higher at $13.75 ½, and July wheat closed 11 ½ cents higher at $6.73 ¼.

Grain prices spiked higher early in the trading session as the morning forecast was left mostly unchanged still calling for drier than normal conditions for key segments of the Midwest.  Going into the weekend during a weather market the trade likely lightened up some of the long positions to take the "forecast changing" risk off the table.  New crop corn may have also run into some hedge pressure as we got above the spring crop insurance price of $5.68 for the first time since March 20th.

The latest Commitment of Traders report shows the "managed money" adding 17,843 corn longs and decreasing corn shorts by 9,847.  This puts there net total position using futures and options at net long 70,715 contracts of corn which is comparatively small when looking at the soybean position.  The "managed money" hardly touched there massive long soybean position adding 1,590 longs and reducing shorts by 3,008.  They are currently holding a net long position of 217,554 contracts of soybeans using futures and options.

Medium Term Outlook:

For corn, the main point we want to drive home is that the USDA has a 1.881 billion bushel carryout projected WITH an increase in demand of 1 billion bushels from last year.  Basically without the estimated demand increase we were really looking at a carryout well above 2 billion.  Sure we could see a yield reduction from weather but we have plenty of leeway in corn before seeing heavy demand rationing.  It is soybeans that we see having the potential to rally even without a weather market as they have a much smaller window to replenish supply.

Ethanol production was pegged lower on this week’s report while supply increased.  This could have been the reason July corn fell 36 ½ cents to December this week.  Blending margins have really dropped for the new crop timeframe and with rumors of plants slowing down/temporarily closing we have to ask if that 5 billion bushel demand estimate by the USDA isn’t still too high?

Weather is still going to lead the fundamentals in price direction but there are plenty of reasons for the market to hold back.  If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Thanks and have a great weekend!

Chart: December CornDec Corn

Chart: November SoybeansNov Soybeans

 

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 6/21/12

Jun 21, 2012

Grains lost some of their recent gains as they finished the day sharply lower.  December corn closed 16 ½ cents lower at $5.50, November soybeans closed 24 ¼ cents lower at $13.71 ¼, and July wheat closed 2 ¼ cents lower at $6.61 ¾.

Globally it was a "risk off" trade today with sharp declines in many outside markets.  The US Dollar Index was sharply higher, crude oil was over $3 lower, and the Dow Jones futures were over 250 points lower.  This overall weakness certainly affected the agricultural markets especially after the 3 day rally they just had.  Also, the midday forecast put some additional rains in the 6-10 day outlook for the central belt.  They did reduce rains for the Southeastern Missouri to Indiana areas in the 7-10 day period.

Medium Term Outlook:

For corn, the main point we want to drive home is that the USDA has a 1.881 billion bushel carryout projected WITH an increase in demand of 1 billion bushels from last year.  Basically without the estimated demand increase we were really looking at a carryout well above 2 billion.  Sure we could see a yield reduction from weather but we have plenty of leeway in corn before seeing heavy demand rationing.  It is soybeans that we see having the potential to rally even without a weather market as they have a much smaller window to replenish supply.

Ethanol production was pegged lower on this week’s report while supply increased.  This could have been the reason July corn has led the move lower.  Blending margins have really dropped for the new crop timeframe and with rumors of plants slowing down/temporarily closing we have to ask if that 5 billion bushel demand estimate by the USDA isn’t still too high?

Weather is still going to lead the fundamentals in price direction but there are plenty of reasons for the market to hold back.  If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Thanks and have a great weekend!

Chart: December CornDec Corn

Chart: November SoybeansNov Soybeans

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 6/19/12

Jun 19, 2012

It was another sharply higher close at the Chicago Board of Trade for grains.  December corn closed 29 ½ cents higher at $5.63 ½, November soybeans closed 45 ¼ cents higher at $13.84 ½, and July wheat closed 19 ¼ cents higher at $6.49 ½.

Weather and lower crop ratings account for the majority of this strength.  Yesterday afternoon corn’s good-excellent rating dropped by another 3 points and is now at 63% good-excellent.  Soybean’s rating dropped by 4 points and is now at 56% good-excellent.  After two consecutive weeks of significant drops in crop ratings and more dryness in the forecast the market is certainly worried about declining production.  This has prompted the two day run in corn bringing December within a penny of its 200 day moving average.  Dec corn has not been above this average since November 10th 2011! 

Chart: December CornDec Corn

November Soybeans rallied to within 5 cents of their contract high at $14.00!  A settlement above $14 would be technically strong and given the current fundamentals and momentum soybeans may try to surpass this level soon. 

Chart: November SoybeansNov Soybeans

Tomorrow we have the weekly ethanol production report (9:30 am CST) as well as the FOMC statement (1:15 pm CST).  If the Fed decides to continue its "loose" monetary policy we could see more dollar weakness and commodity strength.  For now the weather forecasters will still dictate market direction, so watch for any changes to the morning and midday models.  If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371. Thanks and have a great week!

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/15/2012

Jun 15, 2012

It was a sharply lower day in the grains especially in the old crop contracts.  July corn closed 22 cents lower at $5.79 ½ while December corn was down 10 cents at $5.06.  July soybeans closed 10 cents lower at $13.76 while November ended the session 5 ¼ cents higher.  July wheat was down 14 cents at $6.09 ½.

We began the day with a USDA announcement of cancelled soybean sales to China (147,000 MTs) for old crop.  At the same time they announced 120,000 MTs of old crop bean sales to "unknown" and another 262,000 MTs of new crop sales to China.

At 10:30 Informa released their acreage estimates.  To the market’s surprise they ended up increasing both corn and soybean acres.  They are now estimating corn acres at 96.759 million (approx 700,000 acre increase).  They are estimating bean acres at 75.959 million (approx 2 million acre increase).  They also increased spring wheat acres to 13.5 from 12.0 and lowered cotton acres by approx 200,000.

An overall increase in acres would be obviously be considered bearish. The main thing to remember is the market will be focusing on the upcoming USDA acreage number (July 29th) as well as the forecast.  Today’s midday showed an increase in precipitation next week and was overall considered "bearish".  We will have to see if this is the same forecast we get on Sunday night.

The other thing to watch for on Sunday is outside market influence from the Greek elections.  This has been a large concern for the market and much of this may already be worked into the current price levels.  Still, if you see a sharp drop in the Dow Jones and rally in the US$, watch out for weaker grains.

Next week we will have the quarterly stocks and acreage reports on Friday the 29th.  This is one of the most important report days of the year for market direction.  To add to the excitement we will also have the markets open during the release of this report for the first time.  As a hedger you will want to be positioned for coverage prior to Friday. 

If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Thanks and have a great weekend!

 

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 6/14/12

Jun 14, 2012

Corn and wheat finished strong while old crop soybeans had a sharp selloff.  July corn closed 9 cents higher at $6.01 ½, July soybeans closed 22 ¼ cents lower at $13.86, and July wheat closed 7 ½ cents higher at $6.23 ½.

This morning we had NOPA Crush as well as export sales which were both above expectations for soybeans.  Crush was expected to be around 134.7 but instead came in at 138.266.  Total soybean export sales were estimated to be between 475,000 – 750,000 MTs but we had 425,100 MTs in old crop sales and 580,000 MTS in new crop.  Basically it was surprising to see the soybean market leading the way lower today despite strong fundamental news.

Corn export sales were the opposite coming in well below expectations.  The market was guessing 375,000 to 700,000 MTs in total sales.  Instead they came in at 92,100 MTs of old and 77,700 MTs of new.

The midday forecast was left mostly unchanged from that of this morning.  We will continue to watch for any forecast changes for market action.  The economy and outside markets have also been a large factor in grain prices lately.  The upcoming Greek elections on Sunday night will surely be watched closely.  A negative outcome on Sunday night could be one downside risk to watch out for in the short-term.

USDA REPORT SUMMARY

The USDA decided not to change the production or demand for new crop corn.  The key here is that up until Monday crop ratings were rather favorable for corn and there was not a major reason to lower production on this report.  Also to the market’s surprise, they did not change the demand number for old crop corn leaving carryout unchanged at 851 million bushels.  The world corn numbers echoed the US numbers with bearish surprises.

Export demand for old crop soybeans was raised by the USDA and in turn lowered the ending carryout by 35 million bushels to 175 million.  Carrying this number to new crop and lowering total use by 30 million bushels resulted in a net decrease in new crop carryout of 5 million bushels (the market was calling for a 2 million bushel decrease).

Wheat carryout in the US came in below estimates for old crop and new crop.  The only real bearish factors were higher than expected winter wheat production as well as higher new crop world carryout. 

So where do we go from here?  We have to keep an open mind for corn as weather is still the main factor to watch in the following weeks to come.  Pollination is coming soon for some of the early planted corn and the forecasted rains will be very important for price action. 

Soybean market direction will also rely heavily on weather but until we know more about how many acres beans have gained since the planting intentions report, or have been added as doublecrop, the margin-for-error is much smaller for the bean crop than it is corn.  The USDA is currently projecting only a 140 million bu carryout using a 43.9 bpa.  This will make for a long summer of volatility if they continue to add rain and take it out of the forecast.

If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below.  To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371.  Thanks and have a great weekend!

 

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 6/7/12

Jun 07, 2012

Grains closed stronger with soybeans leading the way.  July corn finished 7 ¾ cents higher at $5.94, July soybeans 41 ¾ cents higher at $14.28, and July wheat up 17 ½ cents at $6.41 ¾.

A drier forecast as well as stronger outside markets kick-started this rally early.  The fact that China lowered interest rates by 25 basis points also helped spur strength early.  The highly anticipated meeting between Fed Chairman Ben Bernanke and Congress was a rather "non-event".  Many analysts were calling for another round of Quantitative Easing which never came.  If and when the "QE3" is announced it is generally expected to be supportive to equities and commodities and bearish for the US dollar.

The new crop contracts were leading the way higher for much of the day and the July – December corn spread ended the session down 9 ¼ cents at +57 ½.  This is partly due to the fact that this rally is weather based and it is supporting the crops in the ground more than in the bin.  It is also could be due to the fact that the Goldman roll started today and the exiting of July contracts is forcing the spreads lower.

Trade direction still highly depends on the morning and midday forecasts.  The latest forecast was a little drier again in the 7-14 day range, obviously supporting grains in the process.  We are finally back above the 50 day moving average for December corn and not far away from the 100 day.  If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks and have a great weekend!

 

December Corn ChartDecember Corn

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/5/12

Jun 05, 2012

Grains closed mixed today with July corn down ½ cent at $5.67 ½, July soybeans up 9 ½ cents at $13.49 ½, and July wheat down 14 ½ cents at $6.13 ¼.

Today was another low volume trading session but it was not without large swings especially in the spreads.  The July – December corn spread closed 15 ½ cents higher on the day at +59 ¾. This same spread had a larger trading range than July corn had all alone!  July corn held support for most of the day despite the selloff in wheat and the new crop corn contracts.  CIF basis for corn and soybeans was up sharply at midday for the June/July timeframe and this was likely providing additional support to these markets.

So why did December corn have such a large selloff to close back down near the year’s low?  It could be that the market was looking for a reduction to the crop rating which never came on yesterday afternoon’s report.  The Reuters poll shows that they were expecting at least a 1% drop in the good-excellent corn ratings and instead the ratings remained unchanged except for a 2% swap from good to the excellent category.  Soybeans on the other hand received a less favorable rating than expected at 65% good-excellent and in turn held strong support all day.

The main driving force for grains is still the weather.  Changes to the morning and midday models will continue to have large impacts on the prices. We also have Fed Chairman Ben Bernanke speaking to Congress on Thursday and many are projecting another round of quantitative easing coming up soon.  If this is announced, or even just the fear of this being announced, we could see another drop in the dollar and a financial push back into "hard assets" like gold or other commodities.  If you need to catch up on sales having scale up orders in is not a bad way to get positioned in case we see a rally.  We have found heavy resistance in December corn at the 50 and 100 day moving averages over the past 6-8 months.  Currently the 50 day moving average is at $5.31 and the 100 day is up at $5.48.  These may be good target levels to have orders placed.

If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks and have a great week!

Chart: December corn (red – 50day, blue – 100day)Dec Corn

Chart: Nov. soybeans w/ Fibonacci retracement levels (next major target at $12.23 ¼)Nov Soybeans

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/4/12

Jun 04, 2012

Corn and wheat closed sharply higher today after a huge outside-down day on Friday.  July corn closed 16 ½ cents higher at $5.68, July soybeans 4 ¼ cents lower at $13.40, and July wheat 15 ½ cents higher at $6.27 ¾.

Export inspections were all in line with market expectations this morning except for soybeans which were slightly above the guesses. The outside markets were mixed with lower equities and a lower US Dollar.  The grain market rally was associated with a drier forecast, firmer cash corn basis, as well as the fear of lowered crop conditions on the 3pm ratings report.

The crop conditions ended up improving slightly for corn with 2 percent moving from a good rating up to an excellent rating.  The Reuters poll was calling for a 1 percent drop from the good-excellent categories, so this may be slightly negative for corn’s price action tonight on the re-open.  The first rating for soybeans came in at 65% good-excellent when the poll was estimating 69%.  Winter wheat is 20% harvested which is much faster than the 5 year average pace of 3%.

The main driving force for grains is still the weather.  Changes to the morning and midday models will continue to have large impacts on the prices. We also have Fed Chairman Ben Bernanke speaking to Congress on Thursday and many are projecting another round of quantitative easing coming up soon.  If this is announced, or even just the fear of this being announced, we could see another drop in the dollar and a financial push back into "hard assets" like gold or other commodities.  If you need to catch up on sales having scale up orders in is not a bad way to get positioned in case we see a rally.  We have found heavy resistance in December corn at the 50 and 100 day moving averages over the past 6-8 months.  Currently the 50 day moving average is at $5.32 and the 100 day is up at $5.48 ¾.  These may be good target levels to have orders placed.

If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks and have a great week!

Chart: December corn (red – 50day, blue – 100day)December Corn

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 6/1/12

Jun 01, 2012

Grains had some wild swings today along with sharply lower outside markets.  July corn closed 3 ¾ cents lower at $5.51 ½, July soybeans 4 ¼ cents higher at $13.44 ¼, and July wheat down 31 ½ cents at $6.12 ¼.

Coming into the day session the stock market was hit rather hard after some dismal jobs data.  The May non-farm payrolls increased by 69,000 but expectations were for 150,000.  The Unemployment number increased to 8.2% and the April numbers were revised lower as well.  These numbers surprised the market and caused a rather large selloff in equities that spilled over to grains and energies.

Despite this early weakness July corn was able to find strong support for much of the day and at one time was trading 24 ¼ cents higher on the day!  The reason for the roller coaster ride which eventually took corn back to new lows is unclear but the selloff started in the wheat market first.

Looking at the fund activity on the CFTC’s Commitment of Traders report, we can see that the "managed money" dropped their net long corn position by 47,529 contracts of corn using futures and options.  That leaves them net long only 61,493 contracts of corn.  What is really interesting is that they basically left their soybean position untouched during that timeframe adding 268 long and 740 shorts.  As of Tuesday they are still holding a net long soybean position of 201,835 contracts using futures and options.  The managed money is now holding a net long position of 15,585 contracts of wheat after a net change week – week of +8,558 contracts.

So what do these position changes tell us about price action?  The managed money obviously doesn’t mind liquidating corn but have barely touched their net long soybean position.  At some point if soybean fundamentals/technicals turn weak the liquidation of that trade may push that product sharply lower, just as it pushed wheat sharply higher recently as they liquidated a massive amount of wheat shorts.  Weather is clearly going to be a big determining factor so we need to continue to watch the morning and midday forecasts.  Today’s midday added some more moisture for next week and could be part of the reason the new crop contracts found additional weakness.  Looking at the July – November soybean spreads and the July – December corn spreads it looks apparent that large money is flowing in/out of these products and I am reluctant to put any specific reason to today’s strange market action other than large money flow. 

If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks and have a great weekend!

www.ehedger.com/signup 

Best Regards, 

EHedger 

866-433-4371

www.EHedger.com 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

Log In or Sign Up to comment

COMMENTS

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions